Wednesday, August 12, 2009

A Look at Financial Options

In June, Connecticut’s Department of Public Health released their Health Information Technology Plan on implementing health IT and HIE throughout the state. Recently, legislation was passed by the state’s General Assembly naming the Department of Public Health as the lead HIE organization to establish HIT and to establish an advisory committee to examine and identify ways to improve health information exchange in the state.

One of the major considerations is to establish financial models to support infrastructure development. According to the report, there are numerous funding options available to states and regional health information organizations to develop governance capacity as well as technical infrastructure to support HIEs. However, more recently, as health IT/HIE projects have gained momentum and viability on a national level, states are now in the process of developing financing models to support HIT and HIE adoption.

Several funding options are open to drive the development of HIEs. For example HHS is providing several funding sources through the Office of the National Coordinator for HIT, and through AHRQ, CMS, HRSA, and the Office of Rural Health Policy.

The Recovery Act includes funding for promoting EHR adoption and to use to accelerate the construction of the NHIN. Funds will be funneled through the federal agencies but a significant amount will be distributed at the state level.

Private funding of statewide HIT/HIE efforts have been successful in certain markets where economies of scale are dominant. Private health plans have shown interest in funding start-up costs of HIEs and funding the adoption of EHRs across multiple communities.

Private foundations are an additional funding stream for start-up operations or to help develop pilot programs. The report points out that several foundations in the state could be instrumental in supporting the start-up operations or to help in the development of pilot programs. The most likely of these foundations would be the grouping of insurance “conversion” foundations and the Connecticut Health Foundation.

There are several examples of other states with funding provided by private health plans and foundations such as:

• CalRHIO which was initially capitalized by six of the state’s largest health plans with each contributing $1 million. CalRHIO receives funds from federal agencies and California-based private foundations

• Blue Cross/Blue Shield of Arkansas financed the Advanced Health Information Network while piloting low-cost wireless EHRs for small practices.

• Blue Cross/Blue Shield of Massachusetts provided $50 million to fund the Massachusetts of eHealth Collaborative for 3 years

• Blue Cross and Blue shield of Nebraska is the main payer leading the Nebraska Health Information Initiative

• The provisions made through The Stark and Anti-Kickback Exemptions help physicians and other healthcare practitioners or entities receive donations of interoperable EHR technology

There are several possible revenue models that could be used to provide for sustainability in Connecticut as the state RHIO operates through a variety of membership and/or usage fees. It is not necessarily a viable option in the near term, but as the network-based infrastructure matures and service offerings expand, a membership fee structure by organization type may be a practical consideration. These payments could be maintenance fees for hosted services, transaction-based fees, along with service, training, and secondary data use fees.

In order for Connecticut to take full advantage of the opportunities in HITECH and the other sources of funding for health IT within the ARRA, there has to be coordinated activity among a broad range of stakeholders and the formation and the state designation of an entity to take the lead on HIE. In addition, the state has to take an active role to provide leadership and be able to provide the matching funds that may be required to bring the maximum level of funding to the state.

Outside HITECH funding, the state may receive significant amounts of discretionary funding to meet the requirements of the broader stimulus package. However, it is likely that the availability of the designated funding through HITECH will make it more difficult to obtain the highly competitive discretionary dollars.

To download the full report, go to, click on newsroom, go to press releases, click on July 2009 releases, and go the DPH news release published on July 17th.